Vistry Group Plc reports disappointing financial performance in FY results

Vistry Group PLC (LON:VTY) has announced it full year results for the year ended 31 December 2024.

Greg Fitzgerald, Chief Executive commented:

“2024 was a challenging year for the Group resulting in a disappointing financial performance, despite strong growth in completions and revenue.  We have concluded a rigorous set of reviews and year end procedures with no further issues being identified, and much work has been done to ensure the Group has the right people, structure, systems and controls in place to move forward with confidence.

“Our focus is now firmly on the future and executing our differentiated partnerships strategy.  We are pleased to see the Government bring forward a further £2 billion of much-needed funding for affordable homes, and will be seeking to progress as quickly as possible with our partners to deliver quality new homes across the country.  We continue to drive a capital light, high return model, with a targeted 40% return on capital employed in the medium term.

“Finally, demonstrating that the Group retains a strong financial position remains a top priority for 2025 and we expect to deliver improved cash generation and reduce net debt through the year.”

¹ Completions include 100% of joint ventures.  All other financials are shown on an adjusted basis to include the proportional contribution of the joint venture and to exclude amortisation of acquired intangible assets and exceptional items.

² The results for 2023 have been restated to correct the prior year error that arose due to the cost forecasting issue in the South Division.

FY24 headlines

·    Total completions increased by 7% to 17,225 units (FY23: 16,118 units) with Partner Funded completions up by 18% to 12,633 units (FY23: 10,722 units) and Open Market completions down by 15% to 4,592 units (FY23: 5,396 units), and average selling prices remaining firm

·    Delivering high quality much needed new homes is the Group’s top priority, and we expect to be awarded a 5-Star HBF Customer Satisfaction rating for the sixth consecutive year in 2025

·    The Group significantly underperformed financially in the year, reporting adjusted profit before tax of £263.5m (FY23: £407.3m)

·    The issues relating to the forecasting of costs in the South Division were identified during the year and as previously reported, had a total impact of £165m

·    Following year end procedures, the phasing of the impact of the South Division has been adjusted to include a £20.5m restatement to prior years and the net impact on FY24 adjusted profit before tax has been revised to £91.5m, as compared to the previously expected £105m

·    The Group continued to secure attractive new land and development opportunities throughout FY24, totalling 16,508 (FY23: 15,288) mixed tenure plots

·    The Group has increased its building safety provision by £117.1m in FY24 largely due to additional buildings identified as needing remediation.  This has driven a net increase in the total provision as at 31 December 2024 of £35.4m to £324.4m (31 December 2023: £289.0m)

·    Group net debt position of £180.7m as at 31 December 2024 (31 December 2023: £88.8m)

Cash generation and capital allocation

·    Ensuring the Group retains a strong financial position remains a key priority for FY25.  The Group expects to deliver improved cash generation resulting in a steady reduction in average net borrowings through the year and a year-on-year reduction in the Group’s net debt as at 31 December 2025

·    Vistry Group is targeting a c. £200m reduction in excess working capital in FY25, addressing a build-up of Open Market stock units in FY24.  Tighter cash controls have been introduced at a site level, and there is weekly monitoring at an executive level

·    The Group is also looking at ways to accelerate the cash release from its former Housebuilding landbank with options including bulk sales and discounting under consideration

·    In September 2024, the Group announced a total capital distribution of £130m comprising a £55m ordinary distribution in respect of the H1 24 earnings and a £75m special distribution.  The Group has completed £38m to date and expects to complete the remaining £92m via share buyback, to be concluded in H1 2026

·    Reflecting the performance in FY24, the Group is not proposing any final ordinary distribution in respect of the FY24 adjusted earnings. Future distributions will be made in accordance with Group’s capital allocation policy

Government stimulus

·    The Government is committed to addressing the country’s acute housing crisis and is implementing a range of much-needed demand and supply side initiatives to support this ambition

·    The recent announcement of a £2 billion injection of new affordable homes grant funding is very positive, and alongside the £800m of top-up funding previously announced, will drive investment momentum across the affordable housing sector ahead of the launch of the 2026 Affordable Homes Programme

·    We have also seen strong progress with supply side initiatives particularly focused on land release and planning

·    The Construction Skills Mission Board will address skills shortages, overseeing a £600m package aimed at training 60,000 construction workers by 2029

Current trading and FY25 outlook

·    Group’s forward order book totals £4.4bn (14 March 2024: £4.6bn), with 65% (FY24: 65%) of forecast FY25 units secured

·    The Group sales rate of 0.59 (2024: 0.81) sales per site per week for the year to date is down on prior year reflecting a low volume of Partner Funded transactions in the first quarter

·    We expect Partner Funded activity to step-up as the new £2bn of affordable housing funding is allocated, with a greater H2 weighting of Partner Funded delivery for the Group in FY25

·    We are expecting overall Partner Funded volumes in FY25 to be at a similar level to FY24, with strong momentum going into FY26

·    In the Open Market, we have seen some uptick in our sales rate in the past four weeks and expect this to continue to improve

·    Whilst our sales outlets will continue to reduce as we roll-off former Housebuilding sites, we expect to maintain Open Market volumes at a similar level to FY24 in FY25

·    We are seeing some upward pressure on build costs and are expecting low single digit build cost inflation in FY25

·    The Group continues to expect to make year on year progress in profit in FY25, with profits being more H2 weighted than in prior years.  H1 margins will reflect a greater proportion of delivery from lower margin sites and some impact on profit from actions being taken to accelerate cash generation.  We expect H2 margin recovery to be driven by the commencement of new higher margin developments and the benefit of operating leverage from higher volumes in the second half

Medium term

·    Vistry Group continues to target a 40% return on capital employed, a 12%+ operating margin and revenue growth of 5% to 8% p.a. in the medium term

·    The Board remains confident in the Group’s differentiated partnerships strategy and expects to see good progress towards the Group’s medium-term targets as we see both a step up in partner investment supported by Government policy, and a recovery in the Open Market